The Supreme Court Says Yes to Arbitration and Class Action Waivers

With its 5-4 ruling in Epic Systems Corp. v. Lewis, the Supreme Court delivered a seemingly big win for employers. The Supreme Court held that employees’ waiver of their rights to bring collective or class actions, as a term of an arbitration agreement, is valid and enforceable. This ruling rejected the NLRB’s position that such waivers are invalid given the NLRA’s grant to employees of “the right . . . to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for . . . mutual aid and protection.” A blog post on Declassified provided a legal analysis of the Epic Systems opinion from a class action—as opposed to employment—standpoint. The Supreme Court has now definitively resolved that employers can use arbitration agreements to prevent employees from bringing a collective action.

But Corporate America Is Conflicted

Ironically, at the very moment the Supreme Court has made it easier for employers to double down on arbitration agreements, some businesses are making headlines by curtailing arbitration terms for certain claims. It’s safe to say that the #MeToo movement has something to do with it.

Last week, after months of scrutiny and negative publicity, Uber announced that it would “no longer require mandatory arbitration for individual claims of sexual assault or sexual harassment by Uber riders, drivers or employees.” As NPR reported, Uber’s new policy does not apply to claims brought as class actions.

Uber wasn’t the first to take this step. In December 2017, Microsoft publically endorsed legislation that would protect sexual harassment victims’ ability to bring a case in court instead of in arbitration where they could be prohibited from speaking of the incident. In the same statement, Microsoft announced its own new policy and waived its contractual requirements for arbitration of sexual harassment claims.

Even some law firms have had to adapt their employment agreements in the wake of #MeToo. Posts of Munger Tolles & Olson’s summer employment contract, which effectively mandated arbitration for harassment claims, garnered unwanted attention on social media. In response, the firm released its own tweet statement that it would “no longer require any employees, including summer associates, to sign any mandatory arbitration agreements.”

#arbitrationwhatnow?

While employers have weighed the costs of arbitration versus litigation for decades, the current environment requires new considerations. Are the cost savings of an arbitration agreement (including the ability to maintain confidentiality and prevention of class claims) worth the risk of a social media firestorm? Should you carve out individual harassment claims from mandatory arbitration (ala Uber) or risk class treatment, and carve out all harassment claims (ala MicroSoft)? In the throes of #MeToo, it’s important to consider these new costs and benefits. A simple test: If you wouldn’t want it to go viral on Twitter, reconsider.

In April 2017, three months after taking office, President Trump signed the “Buy American and Hire American” Executive Order, which confirmed that his administration would be taking a tough stance on business immigration, including the nonimmigrant work visa programs used by many American employers. The Executive Order itself did not put into action any substantive changes, but instead directed the agencies responsible for immigration—including those within the Department of Homeland Security and the Department of Labor—to propose new rules and reforms “to protect the interests of United States workers in the administration of our immigration system…” It also singled out the H-1B visa program, calling for initiatives designed to ensure that H-1B visas are awarded to only the most-skilled and highest-paid foreign workers.

While the “Buy American and Hire American” Order signaled that big changes were coming to the business immigration landscape, it provided almost no specifics. In the 13 months since, however, the picture has become clearer as the new administration has made a number of important policy changes to comply with the order’s mandate and promised that other changes are on the horizon.

In fact, USCIS Director Lee Francis Cissna recently provided an update on the measures being taken by his agency in its effort to comply with “Buy American and Hire American.” In a letter sent to Sen. Charles Grassley, the Chairman of the Committee on the Judiciary, Director Cissna first outlined a number of important policy changes that have already been implemented by USCIS or are currently in progress. These included:

Publishing a policy memorandum designed to clarify the requirements relating to visa petitions filed for H-1B workers who will be employed at one or more third-party worksites. This new policy, issued in February 2018, means that employers will be required to comply with more rigorous documentation requirements and adjudication standards when petitioning for H-1B employees to work at client sites or other offsite locations.

Setting up a dedicated email hotline for reporting alleged fraud and abuse in the H-1B system.

Conducting more H-1B site visits and targeting H-1B dependent employers to verify that those employers are paying H-1B workers the statutorily-required salary.

Expanding USCIS’s site visit program to include L-1B “specialized knowledge” worker petitions, initially focusing on employers who use L-1B workers at offsite locations.

Releasing a policy memorandum instructing USCIS officers adjudicating nonimmigrant visa petitions to apply the same level of scrutiny to both initial petitions and extension requests. This memorandum, issued on October 23, 2017, rescinds USCIS’s previous policy which allowed adjudicating officers to give deference to a prior petition approval when adjudicating certain extension requests.

Director Cissna’s letter then laid out several other planned initiatives that will have a significant impact on employers who hire nonimmigrant workers. These planned changes include:

Proposing a new regulation to remove H-4 visa holders (dependent spouses of H-1B workers) from the class of foreign nationals eligible for work authorization. This proposed change, which will require a public notice and comment period, would undo an Obama-era regulation that made certain H-4 visa holders eligible to work.

Establishing an electronic registration program for H-1B cap petitions to allow USCIS to better manage the intake and lottery process for H-1B petitions.

Implementing regulatory changes to revise the definition of “specialty occupation” for H-1B workers and to make other changes to the H-1B program. Although the specific proposed changes have not yet been announced, it’s a sure bet that these changes will only make it more difficult for employers to successfully sponsor H-1B workers.

Drafting a proposed regulation to remove the International Entrepreneur Rule, another Obama-era regulation that was designed to allow certain foreign entrepreneurs to stay in the U.S. to establish and operate start-up businesses.

As these and other developments demonstrate, it’s clear that the Trump administration plans to take a hardline on business immigration. The policy changes that have been implemented or announced thus far are already chipping away at the ability of employers to successfully sponsor foreign nationals for nonimmigrant visas, with certain H-1B employers feeling the greatest impact.

Employers should watch to see how the planned regulatory changes play out and expect that there’ll be more to come. Stay tuned!

When Lump-Sum Payments to Employees are Earnings for Garnishment Purposes

Welcome to Part 3 of our series on the Department of Labor’s three new opinion letters. We previously looked at the opinion letters on FMLA intermittent breaks and travel time compensation. If you missed those posts, you can catch up here (FMLA breaks) and here (travel time).

Next up is the wage garnishment letter, which analyzes when a lump-sum payment to an employee constitutes “earnings” subject to garnishment under Title III of the Consumer Credit Protection Act (CCPA). As background, the CCPA limits the amount of earnings that may be garnished pursuant to court orders, such as for child support. Those limits are 50% of an employee’s disposable earnings (i.e., earnings after applicable withholdings) if the employee is supporting another spouse or child, or up to 60% of disposable earnings if the worker is not. (Garnishments may be subject to additional limits under applicable state law.)

The CCPA recognizes “earnings” as any “compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program.” As the DOL has previously noted, earnings under the CCPA include lump-sum payments made in exchange for the employee’s services. This new opinion letter addresses three categories of lump-sum payments: earnings, partial earnings, and not earnings.

Earnings Subject to Garnishment

Most lump-sum payments to employees are earnings and thus, as subject to garnishment. Though the CCPA specifically identifies commissions and bonuses as earnings, the letter emphasizes that bonuses in particular come in many forms: signing bonus, referral bonus, relocation incentive, attendance award, etc. Regardless of its name, all of these are still bonuses subject to garnishment. Similarly, retroactive merit increases, holiday pay, or termination pay are all tied to an employee’s work and thus are earnings and garnishable.

Partial Earning Maybe Subject to Garnishment

Some lump-sum payments are partially earnings, such as workers’ compensation and lawsuit settlements. In the workers’ compensation context, for example, an employee may receive payments to replace lost wages as well as medical expenses. The wage substitute payments are earnings (subject to a garnishment order), and the medical expenses are not. Similarly, for a lawsuit settlement, if an employee receives some portion for lost wages and another portion for compensatory damages, any payment for wages counts as an earning (garnishable), but compensatory or punitive damages would not.

Not Earnings Not Subject to Garnishment

Lastly, the letter recognizes only one instance in which a lump-sum payment is categorically not an earning: the buyback of company shares from the employee.

As always, ask your lawyer if you have questions about what constitutes earnings. Questions about lump-sum payments also appear frequently in the wage and hour context—if a non-exempt employee receives a non-discretionary bonus, that amount should be factored into his or her hourly rate for overtime calculations.

Post navigation

Topics

Archives

Stay Connected

About

Bradley’s Labor and Employment Practice Group provides clients with experienced counsel on a variety of issues related to managing their employees and operations. We regularly represent our clients in federal and state court throughout the southeast.

About Our Firm

Bradley Arant Boult Cummings LLP is a regional law firm with a global perspective. Our more than 500 attorneys provide corporate and individual clients around the world with a full suite of legal services in dozens of industries and practice areas. Bradley’s nine offices are located in Alabama, Florida, Mississippi, North Carolina, Tennessee, Texas, and the District of Columbia, giving us an extensive geographic base to represent clients on a regional, national, and international basis. Our clients rely on us for innovative legal services that reflect a deep understanding of their business objectives.Read More…